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Dual resident new entrepeneur - where to register?

EU citizen living and working in UK - would it be possible to register and pay tax in home country?

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Hello, I'm wondering if anyone has been in the same shoes lately who may be able to give some general advice.

I'd like to set up a business, something with an online shop but also as a kind of service (custom products/design industry). I'm a citizen of an EU country, currently living in the UK, and although furloughed at the moment, I'm also employed here for now and this would be a side gig.

The problem is, in one word, Brexit. I would like to sell my products and services in the EU countries as well as the UK, and I'm afraid it can be made more difficult to sell my products and services to the EU market if I register as a UK business. I'm also finding my home country's banking and tax system easier to navigate. So I'm thinking of registering as the equivalent of a sole trader in my home country, with which I could get an EU tax number that would allow me the freedom to trade and send international invoices too. 

I have spoken to accountants in my home country and they think it's fine, apparently it is easy and straightforward to declare both my home address as a main base and my residency in the UK as some kind of operation base. Apparently many people from my country do it, living and working elsewhere whilst invoicing and paying tax in my home country. So, ideally, I would keep working in the UK as an employee and pay tax on it as PAYE, whilst also running a business in an EU country (with my website and bank account being there) in my free time. Is this even legal? The accountants I spoke to seem to think so, but I would still be doing most of the work here. And if it's not, what would I have to do to make it legal here? What do I have to tell and account for in the UK? Separate all sorts of UK and non-UK income and make it all complicated....? Thing is, I absolutely do want to keep some base in the EU country, and the business is not large enough to do anything like a parent company or subsidiary or anything like that, it's just me and my idea in the UK but with my valid address in my home country too which I would like to take advantage of, although my country is the very opposite of a tax haven lol, and I think it would be more expensive this way. But I want to remain available to a potential EU market too. So does a simple solution exist? 

I will speak to a UK accountant here too but so far I haven't found one with international experience and I'd like to know first if it's even possible. I tried to ask this elsewhere online too but I haven't yet found the answer. Maybe some of you have been in the same shoes, I'd appreciate any input. Thanks!

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By Cheshire
30th May 2020 09:07

Quote:

Hello, I'm wondering if anyone has been in the same shoes lately who may be able to give some general advice.

I'd like to set up a business, something with an online shop but also as a kind of service (custom products/design industry). I'm a citizen of an EU country, currently living in the UK, and although furloughed at the moment, I'm also employed here for now and this would be a side gig.

The problem is, in one word, Brexit. I would like to sell my products and services in the EU countries as well as the UK, and I'm afraid it can be made more difficult to sell my products and services to the EU market if I register as a UK business. I'm also finding my home country's banking and tax system easier to navigate. So I'm thinking of registering as the equivalent of a sole trader in my home country, with which I could get an EU tax number that would allow me the freedom to trade and send international invoices too. 

I have spoken to accountants in my home country and they think it's fine, apparently it is easy and straightforward to declare both my home address as a main base and my residency in the UK as some kind of operation base. Apparently many people from my country do it, living and working elsewhere whilst invoicing and paying tax in my home country. So, ideally, I would keep working in the UK as an employee and pay tax on it as PAYE, whilst also running a business in an EU country (with my website and bank account being there) in my free time. Is this even legal? The accountants I spoke to seem to think so, but I would still be doing most of the work here. And if it's not, what would I have to do to make it legal here? What do I have to tell and account for in the UK? Separate all sorts of UK and non-UK income and make it all complicated....? Thing is, I absolutely do want to keep some base in the EU country, and the business is not large enough to do anything like a parent company or subsidiary or anything like that, it's just me and my idea in the UK but with my valid address in my home country too which I would like to take advantage of, although my country is the very opposite of a tax haven lol, and I think it would be more expensive this way. But I want to remain available to a potential EU market too. So does a simple solution exist? 

I will speak to a UK accountant here too but so far I haven't found one with international experience and I'd like to know first if it's even possible. I tried to ask this elsewhere online too but I haven't yet found the answer. Maybe some of you have been in the same shoes, I'd appreciate any input. Thanks!

Not a good idea to get tax advice from 'someone in the same position', you need a qualified tax advisor.

This is a forum for Accountants, a fair few of whom have international experience. They really are not that hard to find.

I've PM'd you a couple of recommendations.

You also need to sort out a proper Accountant in your home country, one who knows rather than just 'thinks' you plan is ok. Or not.

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By Matrix
30th May 2020 09:28

I don’t usually reply to Anonymous posts from business owners but just wanted to advise that the registration in your country of origin has no impact on the UK tax position.

While you are UK resident your sole trader profits would be taxable in the UK in the first instance (with no credit for the tax paid in the other country) and you would need to follow the UK VAT rules.

For VAT you could try Simply VAT for advice.

In summary, no, you don’t get to choose where to pay tax. This is the wrong forum for the legal issues which have not been addressed.

Edited to say that you call yourself Dual Resident, has someone told you that you are dual resident?

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By concretebutterfly
30th May 2020 11:16

Thank you for the replies.

Sorry for writing in the wrong forum. I posted here because I tried to find answers through Google and I found a similar question here from someone doing the reverse (moving to another EU country to the UK), which had been answered.

The accountants I spoke to in my home country are proper and qualified :) They "think" it's OK because the solution they suggested is written in law and practice is common.

Nobody "told me" I am a dual resident, I just think I am :) I have a permanent residency document here in the UK (to be exchanged to settled status when the deadline comes), and I also have a permanent registered address in my home country which is valid and declared (you have to undeclare yourself from there which I haven't done) although I don't pay tax there because I don't have any income there (and currently double taxation rules also apply).

I'm not yet a business owner, and I'm not breaking the law :) I just want to know how to do it legally before I even do anything. My country's law and tax system has a solution, they have a simplified rate for small, low turnover side gigs and it is entirely possible to do it with an international tax number that makes it easy to invoice in the EU and is currently recognised in the UK. I even found a good bank account in my country too with a free accounting software designed for startups like the one I'm planning to launch. The question was, how does it get recognised in the UK and how is it best to account for it?

I don't "want to choose" where to pay tax, I asked how do I pay tax in the UK if I want to keep my business in the other country with bank account etc. I don't want to be a UK sole trader (if I don't absolutely have to for this), I want to be an entrepeneur of the EU country, doing some business in the UK. Does the UK recognise this and what will constitute as a UK income? Everything, since I'll be doing most of the work from my UK kitchen? Only the money from UK invoices? Or nothing because it will all be an income on the other country's bank account? (I don't expect to go over the VAT threshold).

I'm sorry I'm not an accountant and I have stupid questions :) But I'm starting from zero and I thought a forum was a good place to explore before I have to pay someone for an advice. I hope this clarifies a little bit, thanks.

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By Matrix
30th May 2020 11:59

You will be a UK sole trader subject to UK tax on your business profits, you don’t get a choice.

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By concretebutterfly
30th May 2020 12:36

Thanks. I will register in the UK, as a sole trader then. But can I still register in the other country as well? You're being helpful but I still don't think you understand, I don't want a choice, I just asked for ways to be present in both countries because I want to be able to do business freely in the EU :) That's why I spoke to accountants there first. I do understand, it's going to be mainly a UK business, and that's what they said, that there are ways to declare it in the other country as a business operating in the UK. And then on these UK operations I will have to pay tax here, that's what I expected to do but I wasn't sure if I have to do it as a sole trader here or there are other legal ways to register here. That's been cleared. Thanks.

The second question is, whether for the UK accounting and tax declarations, do I have to have a UK business bank account for or can I use the bank account in the other country? (The bank can be multicurrency and keep the pounds in pounds and the euros in euros). So that account can still be attached to my UK tax registration and can still be easily usable and taxable in the UK, can't it?

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By Matrix
30th May 2020 12:45

You have a choice about whether to over complicate your taxes or not so I would choose not to. There would be no credit for tax paid overseas, all your business profits would be taxable here. So there could be two lots of professional fees and tax. The bank account is irrelevant.

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By concretebutterfly
30th May 2020 13:14

Thanks. It does seem complicated. My country recognises dual residencies for sole traders, so even without a company form, I could register there as "head office" and here as "operations". They would know about the business operating here and I would get a tax number for it. My confusion was that whether I could use that number and all that registration documents to register here, but that's been cleared since, thanks, I know it's not possible and registering as a sole trader here, freshly, is the only legal way. I presume that doing so means it's still legal in both countries, and if I have to invoice a client in the EU, I can do it through my country's system.

I seem to bring myself some headaches indeed. But I want to secure myself against any potential limitations Brexit might bring and I want to have stronger ties with my country. There is a double taxation rule between the UK and them so hopefully I can ask for relief there since all taxes would be paid here.

It's good to know about the bank account, I'd definitely prefer to bank there.

Many thanks for the help. I think I can take it from here and approach a UK accountant with less stupid questions. :)

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Replying to concretebutterfly:
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By Matrix
30th May 2020 13:20

I don’t really know what you mean about invoicing a client from your own country (this is still a UK sale), but I will leave your new accountant to sort out the detail.

Try the suggestions which Cheshire has made and SimplyVAT for the VAT.

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By Tim Vane
30th May 2020 11:39

Sounds to me like it’s all taxable in the UK. It also sounds as if your other accountants don’t have a clue what they are talking about. You also need to stop using phrases like dial resident which doesn’t mean what I think you think it means. So (a) get a UK accountant and (b) ditch the muppets you are currently speaking to.

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By concretebutterfly
30th May 2020 12:59

I wanted to know if it's possible to register there as well as here, not instead of! :) I don't want to evade UK tax, I just want to be able to trade in the EU too. That's why I asked people there first. They said yes, their law recognises businesses registered in that country with main operations in the UK. They know what they are talking about but since they are based in another country, forgive them for not knowing how to do the UK part. promise I won't use them to deal with HMRC. :)

All I wanted to know if the UK recognises this kind of "free movement" or dual residency of a sole trader. No is an answer too I guess :)

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By Matrix
30th May 2020 13:06

Have you asked them if your business profits are taxable there and if there is a credit for the UK tax already paid on those profits?

When you say register, what do you mean - for what are you registering? If it is for tax I really would check again with them given you are UK resident (and not dual resident) and ask the above question.

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By concretebutterfly
30th May 2020 13:22

They said there is a double taxation treaty so it would not be taxed twice, although there will be some fees to pay there too.

I can register for head office there and operations here, they said their law recognises both addresses but I don't know if that means dual residency now, is that not what it means? I'm confused!

Registering, I mean for tax.

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By Matrix
30th May 2020 13:31

Is it a VAT registration if you mention an EU number?

I think it is crazy but I don’t know whether you are right or not about the Brexit implications. You really need to look at the VAT implications which have not been discussed here.

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By concretebutterfly
30th May 2020 13:46

No, not VAT, just an EU tax number that you have to put on the invoice. Every business and employee has a tax number in my country and the accountants said I can get an EU one to be able to do business in the EU. Maybe it is the number that's used in the EU for VAT as well, I'm not sure.

In the UK I know it's two separate things (registering as sole trader and registering for VAT), but I haven't looked into VAT here at all because I would not expect to go above the threshold for some time yet.

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Hallerud at Easter
By DJKL
30th May 2020 14:02

Is than not merely an EORI number?

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By concretebutterfly
30th May 2020 14:24

No. I just googled it and it seems to be the EORI is an EU customs number. What my accountants talked about was a tax number. I googled it in my own language, and it took me to the VIES page so I think Matrix was right and it is a VAT number.

My accountants said that as a business owner there, it's necessary to have this number to invoice between EU countries. (I'm not sure how also registering here as a sole trader relate to it then? Do I have to send a UK invoice to everyone?)

My country also has a high(ish) threshold for VAT as well but you get this number anyway, even if you pay zero VAT. But I can't yet register for that in the UK, I think (I hope) to start trading in September and with a low turnover initially so I would not be over the threshold for a while.

However, if I do cross the UK threshold, can I use this EU number then for VAT here as well or do I have to register here separately again?

Eh maybe it is crazy but I want to be open to an EU market from the start and I want to secure myself against potential limitations. I'd sell design products and services and I feel it's a taste dependent thing that might find my native continental market a bit better than in the UK (it might not) but right now I feel it's a headache worth getting over with first, if Brexit means a whole lot more headache to do this later.

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By Matrix
30th May 2020 14:05

If you are selling goods to other EU countries then their thresholds, often nil, come into point.

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By concretebutterfly
30th May 2020 14:45

Yes I'd like to, that's why I wanted to register in both countries, to have an EU base and that EU number. The accountants there can help with the VAT submissions in different countries, and what I've been reading about it is that the EU has a simplified system for it that makes it submittable from a single place, and I found some information on it on the accounting software as well that comes with the bank account. It seems okay on the EU part, I just had no idea how to do it in the UK.

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Hallerud at Easter
By DJKL
30th May 2020 14:00

Surely the key with the products and the EU post Brexit is where they will initially be and where they will be going. If they are crossing a border then it is that issue that imho more needs considered, where the business is "legally" based I suspect is of lesser impact.

Regarding services, well, that will likely depend what they are, how delivered, what particular regulation applies to them etc.

If the whole basis of the enquiry is to facilitate cross border trading then I would address that rather than tax residence etc, however until (if there is an agreement) any agreement is reached between the UK and the EU it all seems a bit moot.

Larger entities have the scale to set up physical operations within the EU, so that is what a lot have already been doing, smaller business may well find that the barriers/costs relating to future cross border movements negate the benefit of having any cross border trade.

Certainly when I started in the 1980s small/medium clients rarely sold or purchased outwith the UK and on the odd occasion they did they had import/export staff solely dealing with the transit issues or appointed agents. When I worked as FC to a retail clothing company in the early 90s (Benetton shops) we had agents dealing with all the formalities (We purchased circa £600,000 a year from Italy), if our setting up a company in Italy would have solved these we would have readily so done(The MD was Italian), but the fact was goods movements had compliance issues which were a cost and when the UK is outside the SM and CU it will revert to having issues;imho it is going to be the movement of goods (and services) across borders that will be the problem rather than the tax residence of the entities doing the moving.

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By concretebutterfly
30th May 2020 14:33

You make a very important point about the products. Indeed, they would be crossing borders and that's a whole other headache that will need to be sorted, however apart from keeping some stock, I would also want to do it on a made to order basis, giving ndividual quotes and custom services, and for that I will need to be able to invoice in the EU, for which I wanted to sort the tax residency issue first, preferably before the rules change with any new agreement :)

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